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Saturday, July 13, 2024

Vietnamese workers rejoice as businesses fret as minimum wage hiked

As workers rejoice in the increase in minimum wage, businesses are concerned about costs and competitiveness.

More than 3,200 workers at Pham Van Viet, the chairman of garment firm VitaJean lamented this will significantly increase labor costs. Its 3200 workers will receive a bigger paycheck at the start of next month. “We are facing a difficult situation,” he says, referring to the fact that the company is struggling but cannot avoid hiking wages for its workers.

The new decree increased the minimum monthly base salaries for workers at businesses by 6 percent, equivalent to VND200,000-280,000 (US$8-11) depending on location. In HCMC and Hanoi, the minimum base wage is now VND4.96 million per month, up nearly 80 percent from a decade ago.

Most workers are paid using a base salary, which is often at or around the minimum wage level, and they also get various allowances. Thus, the decree should result in increased wage for most workers with the exception of those whose base salaries are already at least 7percent more than the previous minimum level.

This, in the case of labor-intensive sectors like textiles, footwear and furniture, puts massive pressure on business owners. Cao Huu Hieu, CEO of garment giant Vinatex, says his industry only saw demand pick up this year after a sluggish 2023, but a rise in labor costs will force them to hike prices, potentially hampering the recovery.

Concurring with this, Viet says logistics costs have also skyrocketed this year. “My company has to constantly restructure, cut costs and improve technology to increase productivity.”He fears that if costs and wages continue to rise, his company may have to resort to lay-offs. On the other hand, if they retain all their workers and instead hike prices, businesses are concerned their competitiveness will be hit.

Dr Pham Thi Thu Lan, deputy director of the Institute of Workers and Trade Union, says all workers are concerned about their income, especially if it is low. “They want to be loyal to their employers, but they cannot stay at one firm for long if their pay does not improve.”
In contrast to the wariness business owners feel, workers are celebrating the boost to their incomes. Lan Huong, a worker at a garment factory in Hung Yen Province, says her previous base salary was VND4.7 million. The hike, though minor, could make all the difference in her day-to-day life, she thinks.

Since 2009 the minimum wage has risen by about 480 percent, but the consumer price index has only increased by 108 percent. In the first half of 2024 inflation was 4.08 percent year-on-year as against the National Assembly’s target range of 4 – 4.5 percent for the full year.
As for goods and services provided by the government such as electricity, healthcare and education, it should raise prices gradually to prevent sudden spikes that could affect consumers.

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